Mark Mandula, Editorial Board Member of TRF News and Chief Marketing Officer, United Capital Funding Group, discusses about COVID-19 and how the industry is going to be impacted.
The current COVID-19 crisis is a tragedy that includes many facets; a political one, an economic one and most importantly, a human one. It is a story rapidly unfolding without a clear answer. Perhaps the only clear aspect of COVID-19 is that the impact will spare no one, country, industry or location. The fact that today’s global death toll is nearly 7,200 according to data compiled by John Hopkins University is truly tragic.
As an industry deeply rooted in serving SMEs with professional working capital solutions via factoring, it is imperative that we act decisively to help address the myriad of challenges they will face as they run their B2B and B2G on a daily basis. At the same time, we need to refocus our attention to making sure we protect our employees, partners and community. And finally, we need to help all of these key players find ways to mitigate the COVID-19 pandemic in whatever ways we can.
These appear to be huge shoes to fill. The question should not be “are we up to it?” but “how do we implement effective strategies for the three tasks presented above?”
Individually and as part of a large industry, we must acknowledge that this crisis is unlike any other we have encountered in recent memory. As a result, previous responses may not be sufficient, and we will need to be assertive in order to be successful.
There is no shortage of advice from a wide array of sources (credible and otherwise) on action items. I have tried to absorb as many articles and white papers that cover this topic; many focus on specific industries or regions. While they rarely present an identical game plan, one interesting item appears frequently: in the face of COVID-19, doing nothing is not an option.
I have no comment on the potential outcome of COVID-19, as I am not an expert in biology or public health and safety. A significant part of published research outlines multiple outcomes and I’d be more than happy to provide numerous sources if you’re interested. Bain’s Macro Trends Group and McKinsey are two firms that have excellent research in this area.
The duration of the COVID-19 crisis and the effectiveness of responses (international, federal, state, local and others) will have an impact on the magnitude of the action steps needed to effectively respond to the crisis. However, a quick recap of the situation makes sense as a preamble to outlining some actions we can take now.
In every impacted country in the world, the containment effort to slow the spread of COVID-19 will be a major disruption to business as usual. This is true regardless of the extent to which the virus has already spread. We, as individuals and business owners, need to plan for the worst and be very grateful if the worst doesn’t happen. Doing nothing or taking a “wait and see” approach is not a wise strategy to follow. In nearly every industry, there is potential for significant revenue decline. In industries such as travel, dining, hospitality, or transportation, this is a certainty.
As a result, cash crunches and liquidity crises will occur. In the event that there is no firm timeline for crisis resolution, the economy may not bounce back or recover for a long time. Suppressed revenues, which we assumed would be in place only for a short time, could balloon into 2021.
It also seems quite plausible that due to the lack of historical data, panic may occur with our employees, partners, clients and others. The need to communicate honestly and frequently while balancing empathy and leadership will be a requirement for successfully navigating the crisis. Finally, one of the repercussions of the COVID-19 crisis could be a permanent change in behavior by clients and others. This means that the crisis might serve as a catalyst in accelerating trends. Acknowledgment of this increases the chances that we can successfully guide our factoring businesses and clients to success through an anticipated downturn.
So what steps can we as leaders in our industry do to help mitigate the effects of the current COVID-19 crisis and emerge stronger? I have undertaken a significant amount of research and a brief authored by McKinsey & Company [edited and amended below] does an excellent job of answering this important question.
Priorities for combatting COVID-19 crisis for factoring firms:
It has been said “chance favours the prepared.” There has never been a time in recent history when this statement has been more valid. I believe “chance” will look favorably on the factoring firms who take assertive, organized actions plans now to mitigate the current economic attitude over the near and long term. It will take an all team effort to successfully implement the short list of suggestions offered in this article. I do believe that we as an industry will succeed if we set our minds to it, and as a result we will be better prepared to serve SMEs and our partners now and after the COVID-19 crisis passes and we get work to repair our communities.